NY’s disability pension gambit

by E.J. McMahon |  | New York Post

New York City’s pension costs will reach nearly $8.8 billion in the coming 2016 fiscal year — more than double the 2006 level and nearly eight times the 2001 amount.

Yet now, with a week to go in the state legislative session, Albany is poised to drive those costs even higher.

Egged on by Gov. Cuomo and backed by the state Senate, the city’s police and fire unions are lobbying for a big increase in disability benefits for their most recently hired members.

The plan will immediately add about $40 million to the city’s annual budget, and the price tag will grow from there. Mayor de Blasio only recently countered with a far-less-costly alternative — but it’s likely to be too little, too late.

Siding with the unions, Cuomo is urging the City Council (and by extension the mayor) to “do the right thing” by asking the Legislature to give the unions what they want.

But as he ought to know, it’s not that simple.

The disability dispute is the outgrowth of a gutsy move by Cuomo’s predecessor, David Paterson, who shocked the Legislature in June 2009 by vetoing an extension of the old Tier 2 police and fire pension plan.

At the time, Paterson was angling in favor of his pension reform, known as Tier 5.

When a watered-down Tier 5 was finally enacted later that year, it didn’t cover New York City cops and firefighters hired after the Tier 2 expiration date — because then-Mayor Michael Bloomberg reckoned the city would save more by assigning them to another, older pension plan known as Tier 3.

Tier 3 is less generous than Tier 2 in a number of ways, but the two plans differ most starkly when it comes to disability benefits.

Injured Tier 2 members are entitled to tax-free, accidental disability pensions equivalent to 75 percent of their final average salaries.

Tier 3 offers a disability pension equivalent to 50 percent of a smaller base salary, which must then be offset by half the value of any Social Security disability benefit.

And unlike Tier 2, Tier 3 doesn’t include a presumption that heart and lung ailments are duty-related.

Few would want to deny greater compensation to young officers seriously and permanently disabled by injuries suffered in the line of duty.

But the union-backed bill wouldn’t end there. By extending Tier 2 disability benefits to Tier 3 members, it would perpetuate a system in which disability pensions have become downright common for city firefighters, in particular.

Tier 2 disability pensions — which Cuomo now apparently favors restoring — were claimed by 73 percent of the 6,121 firefighters retiring between 2002 and 2013, according to city pension records.

And this isn’t just a post-9/11 trend; from 1994 to 2001, the number of firefighters with disability pensions rose from 40 percent to 60 percent of the annual total.

Police disability retirements peaked at 40 percent of the total in 2009; as of 2013, the number still came to 21 percent.

Disability pensions are much less common outside New York City.

In 2014, only 6 percent of the new retirees in the state’s police and fire pension system were receiving full accidental disability pensions.

Not by coincidence, New York City’s fire and police pension funds also have large unfunded liabilities.

As of 2013, the assets of the firefighters fund were just 54 percent of what was needed to cover liabilities; for the police fund, the ratio was just 67 percent.

This week, de Blasio offered a credible alternative, backed by the City Council.

The plan would give 75 percent disability pensions for police and firefighters who have injuries serious enough to qualify for Social Security disability payments.

Nonetheless, he still appeared to be in the path of a steamroller driven by the governor.

Three years ago, Cuomo was boosting pension reforms to fix an “unsustainable” public-pension system. Yesterday, he was on the steps of the Capitol, exhorting union members to fight for more.

If they prevail, Cuomo will get a share of credit for their win, and de Blasio will have suffered yet another Albany rebuke.

The losers (as usual) will be the city’s taxpaying public.